On June 23rd 2016, the population of the United Kingdom (including England, Scotland, Wales and Northern Island) had a referendum, answering the question of whether the country should ‘Remain’ or ‘Leave’ the European Union. ‘Leave’ won with a tight majority of 52%. Cutting ties with the European Union brings a lot of risk into Britain, affecting areas such as international trade relationships, prices of everyday goods and even international security.

A design from my AW13 that relied strongly on the UK's relationship with the EU. The lace was made in France and the garment was sewn in Poland. Design by Karolina Laskowska

The purpose of this article isn’t to outline the political intricacies of the ‘Brexit’. I instead hope to discuss some of the economic effects of the decision and how it will specifically affect the lingerie and extended fashion industries. This will not and cannot be an objective article.

Many British luxury lingerie brands rely on French manufacturers for their lace. A Brexit could make these beautiful fabrics prohibitively expensive for many of the independent designers. Photo by Karolina Laskowska

Both sides of the referendum campaign have agreed that a ‘Brexit’ will cause a recession. Certainly in the UK, but it won’t leave the rest of the world unaffected - just the announcement of the results had effects as far reaching as Japan. There are deep fears already that the entire world market will be affected.

Within the first 24 hours of the result announcement, the global market was wiped of $2 trillion in stocks. It was such a shock that even the USA’s Federal Reserve pledged to flood the market with new liquidity to avoid another financial crisis: something that would affect everyone.

Even if you don’t care about banking or the stock market, the fact that Wall Street saw its biggest single day fall in 10 months has very concerning implications. The fear of recession is a big one that will affect all areas of life. In the lingerie sphere, even if it doesn’t increase the prices in countries such as the USA, it may mean less disposable income for such luxuries.

Many British brands rely on manufacturing opportunities within the EU. The prices are lower and workforce skill often higher than what can be found in the UK. It also shortens the supply chain and makes ensuring ethical production easier. In the photo is a small scale factory that I used in Poland for my brand in 2013. Photo by Karolina Laskowska

What I fear most is the effect that it will have on small businesses, particularly independent lingerie brands. Independent lingerie brands are irreplaceable in the industry.

The British pound sterling value has fallen to its lowest in approximately 30 years. For many international customers, this favourable exchange rate has been deemed an excellent time to go shopping with their favourite UK retailers. For the UK businesses themselves, the consequences are much more dire.

The Brexit could cause another major recession that would see consumers eschewing independent designers for lower cost options for their lingerie. For many brands this lack of business could be fatal. Design by Karolina Laskowska

Independent lingerie brands can’t compete with the prices of fast-fashion chain stores. A recession would mean tighter budgets for many customers, with many choosing to shop elsewhere as they cut down on luxuries such as lingerie. Businesses will inevitably close for lack of business.

The process of Britain leaving the EU is unlikely to be concluded for several years. One of the defining features of EU membership is that Britain has free access to the entire EU market.

From a lingerie brand’s perspective, this means that they can purchase supplies and use factories within mainland Europe without having to pay tariffs. Customers in mainland Europe can purchase from British lingerie brands without fear of their lingerie being hit with heavy customs taxes.

Although most metal lingerie components such as wires, rings and sliders are now made in China, many wholesalers with lower minimums tend to be based within the EU. I rely on French and Polish wholesalers of such components as they offer lower minimums than China and lower prices than I find in the UK. Photo by Karolina Laskowska

When Britain leaves the EU, it will have to renegotiate trade deals from a position of disadvantage. Many political figures have suggested that a best case scenario would be that the UK will be able to negotiate a similar agreement to that or Norway. Norway is not a member of the EU, but pays fees into the Union for access to the market and other perks.

Unfortunately, this is not a deal that would necessarily work for the fashion industry. Fabrics and clothing imported into Norway from within the EU still carry customs charges, textile tariffs and processing charges. A similar deal for the UK could see brands that rely on EU suppliers forced to increase their prices by around 30%.

Many UK lingerie brands rely on exporting their products in countries such as Australia and the USA. These are already countries that have to pay import duty on purchases from the UK. Brexit is extremely likely to force UK brands to increase their prices. This will only make cross-border shopping even more unattractive and unattainable: import duty on top of higher prices will force these goods out of many lingerie lovers' budgets.

If Brexit limits British business' access to European factories, my brand may be forced to return to expensive and slow in-house production.Photo by A. Lindseth

The 'Andromeda' set from my most recent collection uses French lace, German beads and thread, Austrian crystals and underwires sourced from Poland. For many independent and luxury brands in the UK, it is impossible not to source from the EU. Suppliers in other countries often have prohibitively high minimum orders and risk of import duty. Brexit could impose so many extra costs to British businesses that they face being forced out of business. Photo by Karolina Laskowska

There’s also a great deal of fear for the future. I source many of my materials from Europe, which will see inevitable price increases (both due to tariffs and damage to the pound sterling value). I cannot afford to use English factories, and I will be frozen out of using my Polish factory due to the tariffs that will be incurred. I will likely lose a large percentage of my customer base, as many are based in Europe.

A design from one of my first large scale production runs. Brexit has left me with the fear that I will either not be able to sell all of it or that I will be frozen out of future relationships with factories.Photo by Karolina Laskowska

I feel as though I’m left with two main choices: closing the business and seeking employment elsewhere or applying for dual citizenship and moving to the EU. Neither is ideal and will see a lot of upheaval. Giving up on my business feels like defeat after all of the hard graft and support that I’ve received over the years. Leaving my home country means saying goodbye to huge swathes of friends, family and support networks.

‘I was very keen for the UK to stay in the EU. [With] regards to the lingerie business, my two main concerns were in terms of both tariffs being imposed on our goods and if the value of sterling remains too low for too long. Both of these things could push the price of goods up, reduce sales and lead to job losses.

However, I have decided that now Brexit is a reality to adapt to the situation and be Progressive Brexiter. I will be supporting whichever politician seems best suited to negotiating a trade deal that supports both our goods and services industries. I also look forward to us hopefully negotiating trade deals outside of the EU zone with the likes of the US and Australia for example (one of the main positives of leaving the EU is that it stopped the UK from entering into trade deals on its own with other nations and so now we will be able to do this hopefully!).

We have a lot of fans and customers in these geographical areas and it would boost business and be great for them if they could buy from us without having to pay import duties or [paying] reduced duties. I am hoping that a Progressive Brexit could, if managed correctly, actually grow the economy and lead to greater economic participation for everyone including those who felt angry enough at the current political status quo to say F*ck-you to it!’

The UK has become world renowned for its creative and skilled corset makers, as well as for its corsetry component suppliers. The Brexit threatens both of these business models. Jenni Hampshire of Sparklewren Corsetry fears that as such businesses often function on a shoestring budget, '...this is just another barrier, another set of challenges, that may convince plenty of creative businesses (who rely on Europe for both supplies and custom) that it isn't worth bothering'.

The British government is currently left in a difficult situation. The referendum was advisory, rather than legally binding, so they could technically choose not to proceed with a Brexit. This would inevitably lead to political and civil turmoil, yet it’s clear that proceeding will cause a wealth of irreversible damage. The coming months will be a difficult time indeed, and I for one am desperately hoping that the politicians make the unprecedented decision of remaining in the European Union.

Have you thought about how Brexit will affect your lingerie buying? Which side of the referendum did you support?

Karolina

7 Comments on this post

They really need to keep the trade arrangements but the Euro needs to be done with, there is too much economic disparity in wages, prices, etc in a country like France or Germany and those of the south like Spain and Italy to maintain a common currency. It is killing southern Europe. Also, all the bright and talented have been leaving these countries for better opportunities in London or Northern Europe, which is killing innovation and only causing a further depressed outlook. Even with Brexit, the UK’s future is brighter than Italy within the EU.

You now live in one of the most exciting countries in the planet. The Eurozone is mired in economic strife and young people have suffered at the hands of a curious ideological project devised in the 1930s that makes no sense in our global, modern world.

Youth unemployment has been as high as 67% in Greece, 50% in Spain, over 35% in Italy and 25% in France. These are the European consumers of the future. Just this week Italy prepared for a €40 billion banking bailout. The EU is killing the prosperity of its young people.

The EU needed to reform across many areas. It needed to return fiscal control to individual member states and return many powers. Yet it was never going to happen until some big shock took place. Brexit will shake things up and any short term uncertainty will be replaced by longer term advantages for business.

While it was said during the campaign that ‘all major economists’ were for Remain, ‘all major economists’ backed the UK entering the Euro and then failed to foresee the banking crisis. However, voices like Steve Keen and Roger Bootle, two rather different economists, predicted all these problems and were pro-Brexit.

At the moment, there is a campaign to ‘whip up fear’ by those in the losing side who believe the result could yet be changed and yet, while there is uncertainty for sure, those with a cool head are not seeing disaster.

If the UK went for a ‘full brexit’, what some call ‘Super Singapore’, there could be the termination of zero tariffs, but this doesn’t mean brutal tariffs either. The average tariff rate between the EU and the US right now is a tiny 2% on average, with some goods facing higher tariffs, while many are zero-rated So if the UK faced the same trade conditions as the US after Brexit that’s not a disaster and there’s every chance the UK trade deal would be more favourable than the US’s.

That said, the most likely ‘compromise’ would see the UK ‘dropping down’ to the EEA and being a big Norway. In that scenario nothing at all would change in terms of trade.

I’m sorry, apparently you didn’t read the part where Karolina had in fact identified the costs for a micro-small business of a Norway type deal – it does in fact involve considerably increased costs for importing materials or garments. It’s just under the picture of the wires and is based on a thorough knowledge of the mechanics of running a small business in Norway, as for personal reasons she has both the contacts and the motivation to have done this pre-referendum.

In any event, I question your assumption of low tariffs. I can assure you the average tariff is NOT 2% for goods coming into the UK from the US under EU rules in our sector. For our industry it is usually 20% VAT plus around another 10% in import duty. It’s been a minute since I exported whole to the USA but we used to assume an average import tax rate from the UK (In the EU) to the US of around 25% (mostly for “woven synthetic fabric women’s undergarment” type categories, though I do recall that it was worse if we got classified as clothing). I’m happy to peruse the HSS Tariff System if you want to cite a reference code or section for your purported figure of 2% if we are out of the EU. I would have assumed we would be on standard WTO terms given that the chances of 2 years being enough time to negotiate with the US being enough are functionally zero. But it’s very sweet that you think things between countries can be organised that fast.

This is an understandably emotional comment. But as a UK resident, disappointed remain voter and the owner of a small independent online lingerie retailer I can only say please don’t assume the worst. We can so easily turn horror stories into reality by talking ourselves into it. A recession is three consecutive months of negative growth – there is no certainty that the unfortunate vote of last week will result in a recession but we could talk ourselves into one. The predicted drop in exchange rate values happened but is already correcting itself. The Euro today is worth just under 83 pence – it was up at 94 pence in 2008 and has been at 83 pence and above on a lot of occasions in the interim period. Nothing is going to happen in terms of negotiation until we have a new prime minister and it is likely that we will not instigate Article 50 (the mechanism for confirming our departure from the EU) until the end of this year. Once Article 50 has been actioned there will be two years in which to negotiate our departure and at this time we have no knowledge of the terms that will be negotiated – good or bad. Nothing in terms of trading is going to change until the negotiations are complete other than exchange rates. Uncertainty is not good but business is always uncertain and all we can do is manage it. There is an old saying “plan for the worst but hope for the best” and that is how I am proceeding through these uncertain times. The one thing I would urge everyone to do is stay calm and not add to the scary speculation. Customers (those buying people we all need) are notoriously fickle and easily scared by words like recession!

Two years is barely enough to negotiate the average moderately acrimonious divorce, never mind a global change in a countries status. As the Chinese have wryly noted, they weren’t aware we had a spare 10 years and 500 international negotiation experts handy to sort out a trade deal with them; especially given that with the fallen pound, plus the oss of the gateway to the EU, our export market to them has lost considerable value.
We might yet escape a full blown recession, but it won’t be by peddling notions that any of this was remotely financially sensible.

This is a great but depressing read :( I was pro-remain too (for many, many reasons besides my business) and am fearful I will lose many of my loyal European customers if they have to start paying customs fees to buy from the UK. My bestselling brand, after my own, is a French one and it works both ways – if I have to start paying import fees to buy from them, I probably won’t. Not without upping my prices and that would put customers off. Luckily I have my own me-made brand to fall back on which won’t be hugely affected in terms of manufacturing costs, but for UK retailers that specialise in European lingerie (and there are a lot of them!) I can totally see how this could potentially kill their business model. Waiting anxiously to see how it all pans out!